After the collapse: A behavioral theory of reputation repair

Mooweon Rhee Shidler College of Business

University of Hawaii 2404 Maile Way

Honolulu, HI 96822, USA Tel. 1-808-956-7610

E-mail. mooweon@hawaii.edu

Tohyun Kim SKKU Business School

Sungkyunkwan University 53 Myeongnyun-dong 3-ga, Jongno

Seoul, 110-745, Korea Tel. 82-11-297-4774

E-mail. tohyunkim@hotmail.com (Tohyun Kim’s affiliation is to be effective as of September, 2010)

2

After the collapse: A behavioral theory of reputation repair

INTRODUCTION

An organization’s reputation evolves through the interactions between the organization

and the audience, primarily its stakeholders: The organization’s past behavior and positions

influence the stakeholders’ perceptions of the organization, which in turn affect the

organization’s future behavior and position (Fombrun 1996). Many studies on organizational

reputation focus on the early stages of this evolutionary process, that is, the creation and building

of an organization’s reputation and its consequences for organizational performance (Rhee and

Valdez 2009). According to these studies, organizations that successfully build and manage their

reputations tend to enjoy various advantages in their performance and behaviors (see Barnett et

al. 2006 for a review). However, reputation scholars have paid relatively little attention to the

potential consequences if an organization’s reputation was in danger.

Unfortunately, an organization sometimes runs into various events—such as accidents or

scandals—that engender the stakeholders’ negative reactions toward the organization which

damages the organization’s reputation. The organization responds to such reputation-damaging

events by engaging in reputation repairing activities. If the organization’s reputation repairing

activities are successful, the stakeholders are likely to restore or renew their perceptions of the

organization. In contrast, the organization’s inappropriate response to the event may worsen the

stakeholders’ perception of the organization. While a growing number of studies have begun to

focus on these later stages of reputation management (e.g., Dukerich and Carter 2000; Heugens

et al. 2004; Rhee and Hadwick 2011; Rhee and Valdez 2009), our understanding of the reputation

repair process is still far from complete. In particular, literature on impression management (see

our review in the next section) certainly supports this stream of research, but reputation studies

3

need to touch on a more comprehensive research agenda for reputation repair.

In this chapter, we first review current studies on reputation repair and impression

management and emphasize a need for a more integrated reputation repair model that elucidates

the behavioral mechanisms underlying an organization’s response to a reputation-damaging

event. In response to this call, we present a behavioral theory of reputation repair and suggest

future research directions. Our model views reputation repair as a process of problem solving,

consisting of three steps: problem recognition, search for solutions, and implementation of

solutions. More specifically, we show how some inherent characteristics of problem solving

may impede effective reputation repair by facilitating superficial problem solving, rather than

substantive problem solving. We also provide the implications of our model for future studies by

discussing how various factors surrounding an organization with damaged reputation foster or

impede reputation repair process and performance. Those factors include the characteristics of

reputation-damaging events (type, attribution, and rarity related to reputation repair),

organizational characteristics (structure, culture, demography, history, and position) and types of

stakeholders. We conclude with a call for caution among future reputation studies and corporate

reputation managers.

LITERATURE REVIEW

Reputation Repair and Impression Management

Most existing studies on reputation repair tend to center on a firm’s impression

management by regarding it as an immediate solution to reputation damages or a crucial element

in reputation repair activities. In particular, those studies have presented several case studies on

reputation repair, which investigate strategies an organization employs to address a reputation-

damaging event and repair its reputation. For example, Fombrun’s (1996) case study of Salomon

4

Brothers notes how it recovered from a financial scandal by accommodative impression

management and substantial reorganization throughout the company. Carroll (2009) found that

Cadbury Schweppes could weather the salmonella scare involving its chocolate products by

defensive impression management. In their study of four Silicon Valley computer firms that

underwent bankruptcy proceedings, Sutton and Callahan (1987) showed that these firms

responded to their stakeholders’ negative reactions by employing diverse impression

management strategies, such as concealing, defining, denying responsibility, accepting

responsibility, and withdrawing. Heugens and his colleagues (2004) also examined the process

in which Dutch food firms reacted to the introduction of genetically modified foods by

developing and combining various impression management capabilities.

Among such diverse impression management strategies available, scholars have stressed

the importance of choosing a strategy that matches with the type of reputation-damaging event

(Coombs 1998, 2007; Dowling 2001; Marcus and Goodman 1991). For example, Marcus and

Goodman (1991) categorize reputation-damaging events by the extent of causal attributions of

organizational responsibility, and argue that the events with strong attributions (e.g., scandals)

require an organization’s accommodative responses while those with weak attributions (e.g.,

accidents) can be dealt with defensive responses. Other scholars have extended these arguments

by further subdividing the types of events and presenting impression management strategies

relevant to each type (Coombs 1998, 2007; Dowling 2001).

There is growing attention to other factors that influence an organization’s choice of

impression management strategies in the face of reputation-damaging events. For example,

Dukerich and Carter’s (2000) theoretical model of reputation repair proposes that a mismatch

between an organization’s reputation (held by outsiders) and its external image (held by insiders)

5

leads to the organization’s misallocation of resources to impression management. While such

studies advance the research scope of the reputation repair model, their focus is still on

impression management as the key reputation repairing activity. Table 1 summarizes major

theoretical and empirical studies on reputation repair with a focus on reputation repairing

impressions strategies they discuss.

----------------------------- Table 1 about here

-----------------------------

A Contemporary Issue: Toward an Integrate Reputation Repair Model

As our brief literature review shows, prior studies on reputation repair have been

focusing primarily on (1) categorizing the types of reputation-damaging events and (2)

presenting effective impression management strategies in response to those events. However,

these studies tend to take normative and suggestive tones, so they are likely to ignore how an

organization actually responds to its damaged reputation (Elsbach and Kramer 1996) and how

various organizational and environmental factors facilitate or hinder the organization’s responses

(Rhee and Valdez 2009). To better understand the reputation repair process and performance, we

need an integrated reputation repair model that concerns an organization’s actual behavior in the

face of reputational threats and the factors influencing such behavior.

A few studies have attempted to examine various ways in which organizations respond

to reputation-damaging events. For example, Elsbach and Kramer (1996) investigated the top-20

business schools’ responses to the 1992 Business Week survey rankings of U.S. business schools.

Their findings suggest that an organization’s members may respond to damages in the

organization’s reputation by shifting their attention to the positive dimensions of its reputation in

order to preserve the positive perceptions of their organizational identity. In a similar context,

Martins (2005) found that some business schools engaged in organizational change in response

6

to reputational damages and others did not, depending on the top managers’ sensemaking of

rankings. His findings, together with those of Elsbach and Kramer (1996), imply that

organizations may demonstrate divergent behaviors in the face of a similar reputation-damaging

event. In his study of product recalls in the U.S. automotive industry, Rhee (2009) examined the

effect of an organization’s reputation on its learning effort to reduce its product defect rate. This

study suggests that damages to an organization’s reputation can induce a certain learning

behavior that helps the organization reduce the occurrence of subsequent reputational damages.

Meanwhile, there have been emerging theoretical endeavors to develop a reputation

repair model that investigates multi-level, multi-dimensional factors affecting the process and

performance of an organization’s response to a reputation-damaging event. Rhee and Valdez

(2009) present a model of the contextual factors that affect the difficulty of reputation repair. In

particular, they present a set of theoretical propositions that address how reputational,

organizational, and interorganizational factors influence an organization’s perceived capability to

cope with a reputation-damaging event and the external visibility of the event, which, in turn,

determines the organization’s susceptibility to reputational damages and the difficulty of

repairing the damaged reputation. Rhee and Hadwick (2011) complement Rhee and Valdez’s

(2009) model by adding relational and behavioral perspectives, as the process of repairing an

organization’s damaged reputation is not independent of the process of restoring the

stakeholders’ trust in the organization and the process of managing and recovering from an

organizational crisis. By reviewing prior research on trust management and crisis management

and drawing their possible implications for reputation repair studies, they present a set of

research agenda that would help in establishing a more comprehensive reputation repair model.

Despite the abovementioned scholarly efforts (also see Table 1 for a summary of those

7

studies), reputation repair studies are still at an embryonic stage and the establishment of an

integrated reputation repair model remains incomplete (Rhee and Hadwick 2011). In an attempt

to build a more complete reputation repair model, this chapter suggests a behavioral theory of

reputation repair that takes into consideration the behavioral mechanisms underlying an

organization’s responses to reputation-damaging events. As a test for the validity of our

framework as a research model, we also discuss future directions of reputation repair research by

demonstrating the potential contribution of the behavioral theory to a better and deeper

understanding of various factors influencing reputation repair processes.

A BEHAVIORAL THEORY OF REPUTATION REPAIR

Superficial versus Substantive Reputation Repair

As we reviewed above, prior studies on reputation repair have focused mainly on how an

organization can influence and fix its stakeholders’ negative perceptions of the organization by

impression management strategies. Such attention to the stakeholders’ perceptions is quite

understandable because reputations are constructed and evaluated mainly by the stakeholders and

they tend to react negatively toward an organization experiencing a reputation-damaging event

(Dukerich and Carter 2000; Fombrun 1996; Rhee and Valdez 2009). However, the exclusive

focus of researchers and practitioners on managing the stakeholders’ perceptions can lock them

into what we call superficial reputation repair in their research model and crisis management,

respectively, which may temporarily conceal the essential problems in an organization’s

reputation repairing activities.

Given that reputation is not static and evolves through the interactions between an

organization’s behavior and its stakeholders’ perceptions over the long run, the organization

should engage in substantive reputation repair in response to a reputation-damaging event,

8

which involves changing the organization’s behavior and position to remove the causes of the

reputation-damaging event and prevent recurrence of similar events. Without such an effort to

address the root causes, an organization’s impression management cannot be an effective long-

term reputation repair tool as its stakeholders are less likely to be convinced of the organization’s

capability to recover from the event and alter their negative perceptions of the organization

(Fombrun 1996). Moreover, if a similar reputation-damaging event recurs, the organization is

likely to suffer much more severe reactions from its stakeholders (Coombs 2004). This suggests

the necessity of incorporating a more evolutionary perspective in the reputation repair research

and practice.

Therefore, both an organization’s successful reputation repair and an ideal research

program on reputation repair must encompass the issues of both (1) restoring or renewing the

stakeholders’ perceptions of the organization by protecting these stakeholders, physically and

psychologically, from the harm of the reputation-damaging event (Coombs 2007); and (2)

identifying the root causes and restructuring or reorganizing the organization’s behavior and

position in order to prevent the recurrence of similar events (Haunschild and Rhee 2004). We

suggest that our behavioral theory of reputation repair opens up an avenue to address these two

issues by driving our attention to the behavioral mechanisms underlying an organization’s

reputation repair process and performance.

A Model

We view reputation repair as a process of problem solving, involving three steps: (1)

problem recognition, (2) search for solutions, and (3) implementation of solutions (Carley and

Harrald 1997; Cyert and March 1963; Tucker and Edmondson 2003). A reputation-damaging

event is considered as a problem, whereby an organization faces imminent failure due to a

9

critical downturn in the stakeholders’ perceptions of the organization (cf. Kim et al. 2009; Kim

and Miner 2007). Such an event triggers the organization’s attention and stimulates problemistic

search, or a search for solutions to the problem at hand (Cyert and March 1963; Greve 2003).

Ideally, the organization makes cause-and-effect inferences to find and implement the solutions

that would eliminate causes of the problem, repair its damaged reputation, and reduce the

occurrence of subsequent reputation-damaging events. Organizational learning occurs at each

step of problem solving, contributing to further reduction in the recurrence of similar events

(Carley and Harrald 1997; Haunschild and Rhee 2004; Miner et al. 1999). Figure 1 presents a

simple illustration of this behavioral model of reputation repair.

----------------------------- Figure 1 about here

-----------------------------

However, reputation repair is not always successful because an organization may face

difficulty in problem solving at various steps for a variety of reasons (Carley and Harrald 1997).

For example, an organization may fail to recognize the problem, identify the cause and effect,

find the appropriate solutions, or implement the solutions. Most importantly, some inherent

characteristics of problem solving may impede effective reputation repair, resulting in superficial

problem solving, rather than substantive problem solving (Cyert and March 1963; Tucker and

Edmondson 2003).

Here, we highlight the three characteristics of problemistic search noted by Cyert and

March (1963: 120-22) as they provide important insights into the building of a behavioral

reputation repair model, particularly the issue of substantive versus superficial responses to a

reputation-damaging event. First, an organization’s search is stimulated when the organization

recognizes a problem whereas its search is depressed when the organization perceives that the

problem is solved (Bromiley, 2005; Cyert and March 1963; Greve 2003). This characteristic

10

may lead the organization to rely on short-term superficial solutions that temporarily conceal the

problem symptoms. For example, Tucker and Edmondson (2003) found that most nurses in

hospitals responded to problems by applying short-term remedies to patch the problems and did

not seek to change the underlying organizational routines to remove the root causes because

those short-term solutions appeared to be successful at least temporarily. Therefore, it is implied

that if an organization perceives that its (or other organizations’) damaged reputation is repaired

by a short-term solution (e.g., superficial impression management), then it is less likely to search

further for a longer-term solution (e.g., substantial reorganization).

Second, search is based on a simple model of causality, such as the assumptions that a

cause will be found near its effect and that a new solution will be found near an old one (Cyert

and March 1963). Since the main symptom of a reputational problem is the stakeholders’

negative reactions, many organizations are likely to search locally for the solutions that directly

involve altering their stakeholders’ perceptions, rather than to search globally for the solutions

that involve identifying and removing the root causes underlying the reputation-damaging event

(cf. Levinthal 1997). Also, if an organization perceives that the implementation of a solution to a

reputation-damaging event is successful, then the organization is likely to apply the same

solution when another reputation-damaging event occurs. For example, Heugens and his

colleagues’ (2004) findings show that most Dutch food companies repeatedly used defensive

communication strategies in response to reputation-damaging events with little attention to the

generalizability of those strategies.

Finally, search is biased by the expectation of the participants in an organization. One of

the consequences of biases from the expectation is a decrease in the amount of problem-solving

time required to solve a problem genuinely (Cyert and March 1963), in favor of resuming the

11

ordinary activities of pursuing the organization’s initial primary goals. Argyris and Schön (1978:

2-3) also note an organization’s tendency to fall into single-loop learning, detecting and

correcting errors to carry on its present policies or achieve its present objectives, instead of

engaging in double-loop learning, detecting and correcting errors to modify its underlying norms,

policies, and objectives. That is, when an organization’s ordinary activities are interrupted by a

reputation-damaging event, the organization is likely to settle on a short-term solution by

superficially managing the stakeholders’ perceptions, without an effort to implement a

substantive longer-term solution, in order to achieve its performance goals that were set before

the occurrence of the event (cf. Tucker and Edmondson 2003).

Building upon the features of problemistic searches and their implications for a

reputation repair model, therefore, a central research question ensues: How do various factors

surrounding an organization with damaged reputation foster or impede each step of the

organization’s reputation repair process (shown in Figure 1) and result in a superficial versus

substantive reputation repair? For example, some factors may facilitate an organization’s

recognition of a problem and reduce its resistance to the implementation of substantive solutions

by increasing the external visibility of a reputation-damaging event; while the same factors can

also increase the level of difficulty in the organization’s reputation repair, especially in the step

of searching for appropriate solutions (Rhee and Valdez 2009). Also, the factors increasing the

level of difficulty in reputation repair may stimulate an organization’s motivation to solve the

problem at hand and to engage in substantive reputation repair; while they also interfere with the

organization’s regular resource management, leading the organization to reallocate its limited

resources to superficial reputation repair in order to weather the immediate negative reactions of

the key stakeholders. Future studies on reputation repair should attempt to provide a thorough

12

investigation into those factors and in the next section, we discuss some factors by examining the

effects of various characteristics of the reputation-damaging events, the organizations, and the

stakeholders on reputation repair process and performance (see Figure 2 for an illustration of

those factors). This discussion will not cover a complete list of research agendas that can be

derived from our behavioral model of reputation repair, but it will offer a clear direction on how

our model can be applied to research on reputation repair.

----------------------------- Figure 2 about here

-----------------------------

FUTURE RESEARCH DIRECTIONS: MODEL APPLICATIONS

Characteristics of Reputation-Damaging Events and Problem Solving

Type of reputation-damaging events

As we reviewed above, many prior studies on reputation repair have examined different

types of reputation-damaging events and effective impression management strategies that match

with those types (e.g., Coombs 1998, 2007; Dowling 2001; Marcus and Goodman 1991). These

studies tend to focus on organizational crises as reputational threats, defined as high impact

events (e.g., accidents and scandals) that threaten the viability of the organization and require its

immediate responses (Pearson and Clair 1998: 60). As Heugens and his colleagues (2004) note,

however, damages to a reputation may originate not only from a crisis, but also from an issue or

trend (e.g., poor performance and low status) represented usually by gaps between the

stakeholders’ perceptions of the organization and their expectations. Crises and issues provide

different implications for search and learning process (Heugens et al. 2004) and, thus, for

reputation repair process.

Since crises are highly salient and impactful, they serve as unfreezing events (Schein

1972), staggering the basic assumptions within an organization (Pearson and Clair 1998) and

13

creating a window of opportunity during which organizational changes can occur (Carley and

Harrald 1997). In this sense, crises may be seen as a catalyst that is likely to motivate and

enhance substantive reputation repair (Sitkin 1992; Winter 2000). However, under the intensive

time pressure and high ambiguity that accompany a crisis situation, it may be difficult for an

organization to effectively invest its time and resources into investigating and identifying the root

causes of the problem and learning from the experience (Ocasio 1995).

On the contrary, issues tend to evolve in a relatively slow pace, allowing an organization

to engage in a deliberate learning process by comparing, analyzing, explaining, and devising

analogies (Heugens et al. 2004; Zollo and Winter 2002). That is, issues equip the organization

with sufficient time and resources that can be devoted to substantive reputation repairing

activities. For example, consistent with the performance feedback model (Cyert and March

1963; Greve 2003), prior studies have found that organizations tended to engage in

organizational change when they observe that their performance indicators such as status in the

marketplace is lower than the level they aspired to achieve (Martins 2005), which may help

reduce subsequent reputation-damaging events (Rhee 2009). However, since issues are not as

salient as crises, organizations may fail to recognize them as problems, and even if organizations

have identified the problems and found the solutions, participants in the organizations may resist

implementing the solutions involving reorganization, which they believe may not be necessary

(cf. Carley and Harrald 1997). Therefore, future studies should investigate how different types

of reputation-damaging events influence an organization’s problem solving process and

performance in its reputation repairing activities and lead to substantive versus superficial

reputation repair. While we proposed the dimension of crises vis-à-vis issues, scholars need to

further explore various dimensions that would differentiate reputation repair process (e.g., severe

14

versus non-severe events; Haunschild and Rhee 2004).

Attribution of reputation-damaging events

Reputation-damaging events vary in terms of the extent to which they are attributed to a

focal organization. If a reputation-damaging event is perceived to be the fault of the organization,

there will be a stronger perception that the organization should be responsibility for the event,

incurring greater damages to the organization’s reputation (Coombs 1998). Therefore, Marcus

and Goodman (1991) and Coombs (1998) argued that the events strongly attributed to an

organizational (e.g., scandals and misconducts) require more accommodative responses from the

organization than those with more external attributions (e.g., accidents and natural disasters), for

which the organization can demonstrate defensive responses. While stronger perception of

organizational responsibility for a reputation-damaging event provides an organization with

greater difficulty in reputation repair (Rhee and Valdez 2009), they may facilitate substantive

reputation repairing activities, rather than superficial activities, when the event triggers the

organization’s proactive responses. For example, studies on learning from failure suggest that a

defensive approach to reputation repair is less likely to produce learning effects than a proactive

approach (Haunschild and Rhee 2004; Kim 1998; Rhee and Hadwick 2011). Therefore, future

studies may examine the effects of the internal vis-à-vis external attribution of a reputation-

damaging event on the difficulty in repairing damaged reputations, relative to its effects on the

trigger of substantive reputation repair.

Rarity of reputation-damaging events

While reputation-damaging events are generally uncommon, there is still variance in the

extent of rarity across different events. For example, accidents caused by natural disasters are

typically rarer than product recalls. On one hand, research on organizational learning shows

15

some behavioral underpinnings leading to the difficulty of learning from rarer events (e.g.,

Haunschild and Sullivan 2002; Kim et al. 2009; Lampel et al. 2009; March et al. 1991). For

example, Lampel et al. (2009) show that organizations are less likely to recognize a rarer event

as a problem as they believe that such an event is not likely to recur. Also, it is more difficult to

make a reliable cause-and-effect inference from a smaller experience sample (Haunschild and

Sullivan 2002; March et al. 1991). Therefore, an organization is likely to have difficulty in

engaging in substantive reputation repair when faced with rare reputation-damaging events.

On the other hand, organizations may be more likely to focus their problem-solving

effort on rarer events because they contain useful lessons (Lampel et al. 2009). That is, events

may be enacted through their salience and trigger organizational attention to the unique and

unusual features of the events (Weick and Sutcliffe 2006). Such increased attention to a rare

event is likely to intensify an organization’s learning endeavor to accumulate knowledge about

and through the event (Lampel et al. 2009). Hence, the rarity of an event may facilitate an

organization’s substantive reputation repair. Given these conflicting predictions, future research

on the net effect of the rarity of a reputation-damaging event, as well as its contingency on

contexts, would be valuable.

Characteristics of Organizations and Problem Solving

Organizational structure

A tightly coordinated and centralized structure seems to enhance an organization’s

reputation repair performance by enabling the organization’s concerted effort at recovery in the

face of a reputation-damaging event that requires immediate responses under time and resource

pressures. It is also possible that the centralization of authority facilitates substantive reputation

repair by improving communication and coordination within an organization (cf. Mahler and

16

Casamayou 2009) and focusing its attention on the problem area, which triggers the

organization’s search for solutions and learning from experience (cf. Haunschild and Rhee 2004).

For example, Fombrun (1996) notes how Salomon, Inc., a holding company of two major

operating units, Salomon Brothers and Philbro Energy, centralized its authority in order to

effectively restore its damaged reputation after a scandal at Salomon Brothers in 1991.

However, Perrow (1984) argues that centralizing authority over procedures to prevent

and detect errors can demotivate organizational members by forcing them to mechanically

comply with rules and procedures. As Haunschild and Rhee (2004) found in their study of auto

product recalls, involuntary responses to a reputation-damaging event is unlikely to result in

organizational learning and improvements in subsequent performance. In this sense, a flexible,

organic structure is more likely to facilitate organizational learning and adaptation, resulting in

substantive reputation repair, than tight, mechanical structure (Adler et al. 1999; Jennings and

Seaman 1994; Puranam et al. 2006). Therefore, future studies should be able to identify and

examine the pros and cons of both organic and mechanical structure in repairing an

organization’s damaged reputation.

Organizational culture

A strong organizational culture is defined as “a set of norms and values that are widely

shared and strongly held throughout the organization” (O'Reilly and Chatman 1996: 166). It can

make an organization’s search and learning process reliable by developing common

understandings of its experience and making its interpretations public, stable, and shared (March

et al. 1991; Sørensen 2002), which may also enhance reputation repair process and performance.

However, stable, shared knowledge interferes with the discovery of variant and contrary

interpretations of its experience from which reliable learning arises (Kim and Rhee 2009; March

17

1991; March et al. 1991). Strong culture may also endanger organizational members’

psychological safety that allows their risk taking attempts and exploratory learning (Edmondson

1999; Tucker and Edmondson 2003). For example, Vaughan (1997) and Mahler and Casamayou

(2009) note that the NASA’s strong culture emphasizing political and bureaucratic accountability

contributed to the Challenger accident in 1986 and the similar Columbia accident in 2003.

Therefore, an adaptive and open organizational culture, rather than a strong culture, seems more

likely to facilitate substantive reputation repair. In addition to the distinction of strong (closed)

and weak (open) cultures, future studies need to expand cultural dimensions and examine how

various features of organizational culture contribute to substantive reputation repair vis-à-vis

superficial reputation repair.

Organizational demography

Prior studies have found that demographic diversity contributes to search and learning

processes (Beckman 2006; Taylor and Greve 2006). These findings may imply that the

knowledge and experience diversity of members in an organization helps its substantive

reputation repair process because such diversity can bring diverse interpretations and

perspectives to problem solving. One way of introducing diversity into an organization is by

recruiting new members with new knowledge or different backgrounds (Harrison and Carroll

2005; Kim and Rhee 2009; March 1991). For example, Fombrun (1996) notes that Salomon’s

first move in its reputation repairing activities was to hire Warren Buffet, an esteemed leader

with personal reputation for integrity, as the interim chairman and Deryck Maughan, an eight-

year veteran of Salomon’s Tokyo office, as the chief operating officer, who subsequently

implemented structural, cultural, financial, and personnel changes.

However, the excessive turnover usually accompanied to the pursuit of organizational

18

demography can be problematic: organizational members who have experiences with rare

reputation-damaging events leave the organization, whereby organizational memory disappears

(Carley and Harrald 1997; Mahler and Casamayou 2009; March 1991). For example, Carley and

Harrald (1997) note that the Red Cross had difficulty in its disaster relief operations after

Hurricane Andrew had destroyed South Florida in 1992, because senior personnel who had

experience with similar events such as Hurricane Hugo in 1989 did not participate in the

operation due to retirement or transfer. Therefore, future studies may investigate the optimal

balance, if any, in organizational demography (e.g., between old, experienced members and new

members of diverse backgrounds), which can significantly enhance an organization’s substantive

reputation repair.

Organizational history

Studies on organizational learning note the benefits of cumulative organizational

experience. By interpreting and making inferences from its history, an organization accumulates

knowledge, attempts to improve on its performance, and reduces the rate of errors and failures

(Haunschild and Rhee 2004; Levitt and March 1988). Hence, in general, organizations with

prior experience in reputation repair are likely to respond effectively to similar reputation-

damaging events in the future.

As we noted above, however, problemistic search is simple-minded (Cyert and March

1963), leading organizations to apply an old solution that they used before to a new problem.

This tendency is exacerbated in the case of reputation repair because, as discussed earlier,

reputation-damaging events are generally rare events, which makes it difficult to draw reliable

cause-and-effect inferences (Haunschild and Sullivan 2002; March et al. 1991). Therefore,

research on organizational learning emphasizes the importance of both volume and heterogeneity

19

of organizational history in learning from rare events (Haunschild and Sullivan 2002; Kim et al.

2009; Madsen and Desai 2010). Extending this line of thought, we can conjecture that an

organization with abundant and diverse experiences of reputation repair is in a better position to

prepare a pool of relevant solutions, especially in the face of diverse reputation-damaging events,

are more likely to be effective in a substantive reputation repair process. Future studies can

further construct a more fruitful set of reputation repair experiences to present comprehensive

links between organizational history and reputation repair process/performance.

Organizational position

An organization’s behavior and performance are enabled and constrained by its position

within social hierarchies, social networks, and resource space, and so is its reputation building

and rebuilding processes. Indeed, an organization’s reputation itself, directly and indirectly,

forms the organization’s relative positions within social hierarchies (Benjamin and Podolny

1999; Podolny 1993) and affects its behavior (e.g., Kim 2010; Rhee 2009). For example, Rhee

and Haunschild (2006) and Rhee (2009) found that organizations with different positions in

reputational order show divergent levels of vulnerability to reputation-damaging events (i.e.,

product recalls) and learning effort to avoid the recurrence of similar events, because the

organizations themselves and their stakeholders have expectations about the organizations

according to certain positions they occupy. Focusing on the multidimensionality of hierarchical

positions, Rhee and Valdez (2009) and Kim (2010) suggest that the organizations’ relative

positions along each dimension have varying levels of salience to the organizations and their

stakeholders and, thereby, have diverging effects on their reputation repairing activities.

Therefore, future studies will benefit from the investigation into how an organization’s relative

positions within multidimensional social hierarchies influence its efforts and abilities to

20

implement substantive reputation repair.

An organization’s position within its social networks may also influence its reputation

repairing activities. An organization’s network partners are its key stakeholders that provide

crucial resources, such as information, knowledge, and endorsement, to the organization (Brass

et al. 2004) and at the same time, form their own perceptions of the organization. Moreover, the

organization’s relationships with its network partners also influence other stakeholders’

perception of the organization (Benjamin and Podolny 1999; Podolny 1993). Therefore, positive

relationships based on trust with network partners may serve as a buffer to reputational threats,

enabling the organization to put more resources and efforts in substantive reputation repair (Rhee

and Hadwick 2011). However, such a buffer may decrease an organization’s motivation to

engage in substantive reputation repair and leave the organization idle relying on superficial

reputation repairing activities. Meanwhile, an organization can also learn from or imitate its

network partners’ experience and knowledge (Beckman and Haunschild 2002), which may

influence the organization’s choice between substantive and superficial reputation repairs.

Hence, future studies may examine how an organization’s structural positions within social

networks, its relationship with its network partners, and the characteristics of those partners

enable and constrain the organization’s reputation repair process and performance.

In addition, an organization’s position on resource space can affect its reputation repair

process (e.g., Haunschild and Rhee 2004; Rhee and Haunschild 2006). For example, Rhee and

Haunschild (2006) found that specialist organizations, or those positioned in a narrower resource

space (e.g., Porsche), are less vulnerable to reputational threats than generalist organizations

covering a larger resource space (e.g., Toyota) because of their clear and focused identity.

Moreover, Haunschild and Sullivan (2002) found that generalists are less likely to learn from

21

their failures because they have to deal with a wider range of complex problems than specialists.

However, Haunschild and Rhee’s (2004) findings suggest that generalists may learn more from

reputation-damaging events because the events have more negative consequences for generalists

due to their greater visibility, and thus are perceived as more significant problems for generalists

than specialists. Therefore, we suggest that future studies continue to investigate the differences

in reputation repair process and performance between generalists and specialists across various

industry contexts.

Characteristics of Stakeholders and Problem Solving

An organization’s reputation repair process and performance may vary depending on the

type of stakeholders it has. The heterogeneous nature of stakeholders’ interests and the different

avenues available for their information gathering may lead to variance in their reactions to

reputation-damaging events and thus provide the organization with different levels of difficulty

in problem solving (Rhee and Valdez 2009). For example, Marcus and Goodman (1991) argue

that shareholders tend to prefer an organization’s defensive approaches to reputation repair that

protect their interests, while the victims prefer the organization’s accommodative approaches.

Rhee and Valdez (2009) note that some stakeholders (e.g., the public) tend to have limited access

to information on an organization’s reputation-damaging events and thereby display inadequate

or excessive reactions to the events. When an organization’s reputation repairing activities

involve dealing with such stakeholders, the organization may engage in superficial reputation

repair by overreacting or underreacting to the stakeholders (cf. Dukerich and Carter 2000). On

the contrary, a special group of stakeholders (e.g., watchdog agencies, mass media, and

endorsers) have access to detailed information and affect other stakeholders’ perception of the

organization (Rhee and Valdez 2009). For example, watchdog agencies’ scrutiny and

22

punishment and the mass media’s reporting on an organization’s reputation-damaging events

make the events more visible to other stakeholders; whereas the endorsers’ persistent support of

the organization after the events increases other stakeholders’ perception of the organization’s

capability to repair its reputation (Rhee and Valdez 2009). While these stakeholders may request

an organization’s substantive reputation repair, the organization may still engage in superficial

reputation repair by lobbying the agencies or endorsers. Future studies may categorize the

stakeholders depending on the types of problem solving approaches they demand from an

organization and investigate how the organization searches for solutions to cope with their

demands and repair its damaged reputation.

CONCLUSION

Building upon our literature review of reputation repair, we realized a need exists for a

reputation repair model that can address an organization’s variant responses to reputation-

damaging events in a more comprehensive, systematic way. In an attempt to satisfy this goal, we

presented a behavioral theory of reputation repair that views reputation repair as a process of

problem solving, with a focus on the behavioral mechanisms underlying an organization’s

motivation and ability to engage in substantive vis-à-vis superficial reputation repairing activities.

An application of our model was presented as the form of a central research question for the

study of reputation repair: what contextual factors create the behavioral forces that lead to an

organization’s choice of a certain reputation repair activity. Among many possible factors, we

discussed the effects of various characteristics of reputation-damaging events, organizations, and

stakeholders on the process and performance of problem solving for reputation repair.

Although we pointed out the emphasis of prior studies on impression management and

the risk that such an emphasis can lead to exclusive research and practical focuses on superficial

23

reputation repair, it does not mean that impression management is not important. Rather,

substantive solutions to the problem of a reputation-damaging event may encompass impression

management designed to protect the stakeholders psychologically from the harm of the event, as

well as reorganization devised to prevent the recurrence of similar events. As Carley and Harrald

(1997) note, an organization even may not benefit from its substantive problem solving unless its

stakeholders recognize or appreciate the organization’s responses to a reputation-damaging event.

Therefore, managing the stakeholders’ perceptions of the organization can serve as a key

supplement to the substantive reputation repair process and a crucial part of an organization’s

successful reputation repair. Thus, another important implication of our behavioral theory of

reputation repair is that scholars and managers should pay attention to how an organization can

enhance reputation repair performance through an appropriate combination of substantive

problem solving with impression management.

While we emphasized the importance of substantive reputation repair in reducing the

recurrence of reputation-damaging events, such an effort to reduce errors or failures should not

discourage an organization’s experimentation. Refinement and exploitation of successful

routines tend to produce reliable outcomes with fewer errors, at the risk of putting an

organization into stagnation (March 1991). Recognizing failure as a necessary by-product of

experimentation, Cannon and Edmondson (2005) suggest that organizations should actively

increase their chances of experiencing failure by deliberate experimentation, which may further

increase their capability to cope with reputation-damaging events (cf. Zollo and Winter 2002).

Similarly, Haunschild and Rhee (2004) found that organizations tend to proactively initiate and

respond to their errors because it helps prevent further errors that exert a greater extent of

damages to the organizations. Thus, we suggest that scholars and managers should explore the

24

behavioral processes in which an organization attend to solving certain reputational threats while

continuously experimenting with new routines and accumulating new knowledge necessary for

its long-term viability in changing environments.

25

REFERENCES Adler, P. S., Goldoftas, B., and Levine, D. I. (1999). 'Flexibility versus efficiency? A case study

of model changeovers in the Toyota production system'. Organization Science, 10/1: 43-68.

Argyris, C. and Schön, D. A. (1978). Organizational Learning: A Theory of Action Perspective.

Reading, MA: Addison Wesley. Barnett, M. L., Jermier, J. M., and Lafferty, B. A. (2006). 'Corporate reputation: The definitional

landscape'. Corporate Reputation Review, 9/1: 26-38. Baum, J. A. C. and Dahlin, K. B. (2007). 'Aspiration Performance and Railroads' Patterns of

Learning from Train Wrecks and Crashes'. Organization Science, 18/3: 368-85. Beckman, C. M. (2006). 'The influence of founding team company affiliations on firm behavior'.

Academy of Management Journal, 49: 741-58. Beckman, C. M. and Haunschild, P. R. (2002). 'Network learning: The effects of partners

heterogeneity of experience on corporate acquisitions'. Administrative Science Quarterly, 47/1: 92-124.

Benjamin, B. A. and Podolny, J. M. (1999). 'Status, quality, and social order in California wine

industry'. Administrative Science Quarterly, 44: 563-89. Brass, D. J., Galaskiewicz, J., Greve, H. R., and Tsai, W. (2004). 'Taking stock of networks and

organizations: A multilevel perspective'. Academy of Management Journal, 47/6: 795-817. Bromiley, P. (2005). The Behavioral Foundations of Strategic Management. Malden, MA:

Blackwell. Cannon, M. D. and Edmondson, A. C. (2005). 'Failing to learn and learning to fail (intelligently):

How great organizations put failure to work to innovate and improve'. Long Range Planning, 38: 299-319.

Carley, K. M. and Harrald, J. R. (1997). 'Organizational learning under fire: Theory and practice'.

American Behavioral Scientist, 40/3: 310-32. Carroll, C. (2009). 'Defying a reputational crisis - Cadbury's salmonella scare: Why are

customers willing to forgive and forget?'. Corporate Reputation Review, 12/1: 64-82. Coombs, W. T. (1998). 'An analytic framework for crisis situations: Better responses from a

better understanding of the situation'. Journal of Public Relations Research, 10/3: 177-91. Coombs, W. T. (2004). 'Impact of past crises on current crisis communication: Insights from

situational crisis communication theory'. Journal of Business Communication, 41/3: 265-89.

26

Coombs, W. T. (2007). 'Protecting organization reputations during a crisis: The development and

application of situational crisis communication theory'. Corporate Reputation Review, 10/3: 163-76.

Cyert, R. M. and March, J. G. (1963). A Behavioral Theory of the Firm. Englewood Cliffs, NJ:

Prentice-Hall. Dowling, G. R. (2001). Creating Corporate Reputations: Identity, Image, and Performance. New

York: Oxford University Press. Dukerich, J. M. and Carter, S. M. (2000). 'Distorted images and reputation repair', in M. Schultz,

M. J. Hatch, and M. H. Larsen (eds.), The Expressive Organization: Linking Identity, Reputation, and the Corporate Brand. New York: Oxford University Press: 97-112.

Edmondson, A. (1999). 'Psychological safety and learning behavior in work teams'.

Administrative Science Quarterly, 44: 350-83. Elsbach, K. D. and Kramer, R. M. (1996). 'Members' responses to organizational identity threats:

Encountering and countering the Business Week rankings'. Administrative Science Quarterly, 41/3: 442-76.

Fombrun, C. J. (1996). Reputation: Realizing Value from the Corporate Image. Boston: Harvard

Business School Press. Greve, H. R. (2003). Organizational Learning from Performance Feedback: A Behavioral

Perspective on Innovation and Change. Cambridge, UK: Cambridge University Press. Harrison, J. R. and Carroll, G. R. (2005). Culture and Demography in Organizations. Princeton,

NJ: Princeton University Press. Haunschild, P. R. and Sullivan, B. N. (2002). 'Learning from complexity: Effects of prior

accidents and incidents on airlines' learning'. Administrative Science Quarterly, 47: 609-43.

Haunschild, P. R. and Rhee, M. (2004). 'The role of volition in organizational learning: The case

of automotive product recalls'. Management Science, 50/11: 1545-60. Heugens, P. P. M. A. R., van Riel, C. B. M., and van den Bosch, F. A. J. (2004). 'Reputation

management capabilities as decision rules'. Journal of Management Studies, 41/8: 1349-77.

Jennings, D. F. and Seaman, S. L. (1994). 'High and low levels of organizational adaptation: An

empirical analysis of strategy, structure, and performance'. Strategic Management Journal, 15/6: 459-75.

27

Kim, J.-Y. and Miner, A. S. (2007). 'Vicarious learning from the failures and near-failures of others: Evidence from the U.S. commercial banking industry'. Academy of Management Journal, 50/2: 687-714.

Kim, J.-Y., Kim, J.-Y., and Miner, A. S. (2009). 'Organizational learning from extreme

performance experience: The impact of success and recovery experience'. Organization Science, 20/6: 958-78.

Kim, L. (1998). 'Crisis construction and organizational learning: Capability building in catching

up at Hyundai Motors'. Organization Science, 9: 506-21. Kim, T. (2010). 'Search behavior, social positions, and institutional logics: The U.S. feature film

industry, 1997-2006'. Unpublished Ph.D. dissertation. Honolulu, HI: University of Hawaii at Manoa.

Kim, T. and Rhee, M. (2009). 'Exploration and exploitation: Internal variety and environmental

dynamism'. Strategic Organization, 7/1: 11-41. Lampel, J., Shamsie, J., and Shapira, Z. (2009). 'Experiencing the improbable: Rare events and

organizational learning'. Organization Science, 20/5: 835-45. Levinthal, D. A. (1997). 'Adaptation on rugged landscapes'. Management Science, 43/7: 934-50. Levitt, B. and March, J. G. (1988). 'Organizational learning', in W. R. Scott (ed.), Annual Review

of Sociology, 14. Palo Alto, CA: Annual Reviews: 319-40. Madsen, P. M. and Desai, V. (2010). 'Failing to learn? The effects of failure and success on

organizational learning in the global orbital launch vehicle industry'. Academy of Management Journal, 53/3: 451-76.

Mahler, J. G. and Casamayou, M. H. (2009). Organizational Learning at NASA: The Challenger

and Columbia Accidents. Washington, D.C.: Georgetown University Press. March, J. G. (1991). 'Exploration and exploitation in organizational learning'. Organization

Science, 2/1: 71-87. March, J. G., Sproull, L. S., and Tamuz, M. (1991). 'Learning from samples of one or fewer'.

Organization Science, 2/1: 1-13. Marcus, A. A. and Goodman, R. S. (1991). 'Victims and shareholders: The dilemmas of

presenting corporate policy during a crisis'. Academy of Management Journal, 34/2: 281-305.

Martins, L. L. (2005). 'A model of the effects of reputational rankings on organizational change'.

Organization Science, 16/6: 701-20.

28

Miner, A. S., Kim, J.-Y., Holzinger, I. W., and Haunschild, P. R. (1999). 'Fruits of failure: Organizational level failure and population level learning', in A. S. Miner and P. C. Anderson (eds.), Advances in Strategic Management, 16. Stamford, CT: JAI Press: 187-220.

Ocasio, W. (1995). 'The enactment of economic adversity: A reconciliation of theories of failure-

induced change and threat-rigidity'. Research in Organizational Behavior, 17: 287-331. O'Reilly, C. A. and Chatman, J. A. (1996). 'Culture as social control: Corporations, culture and

commitment', in B. M. Staw and L. L. Cummings (eds.), Research in Organizational Behavior, 18. Greenwich, CT: JAI Press: 157-200.

Pearson, C. M. and Clair, J. A. (1998). 'Reframing crisis management'. Academy of Management

Review, 23/1: 59-76. Perrow, C. (1984). Normal Accidents: Living with High-Risk Technologies. New York: Basic

Books. Podolny, J. M. (1993). 'A status-based model of market competition'. American Journal of

Sociology, 98/4: 829-72. Puranam, P., Singh, H., and Zollo, M. (2006). 'Organizing for innovation: Managing the

coordination-autonomy dilemma in technology acquisitions'. Academy of Management Journal, 49/2: 263-80.

Rhee, M. (2009). 'Does reputation contribute to reducing organizational errors? A learning

approach'. Journal of Management Studies, 46: 676-703. Rhee, M. and Haunschild, P. R. (2006). 'The liability of good reputation: A study of product

recalls in the U.S. automobile industry'. Organization Science, 17/1: 101-17. Rhee, M. and Valdez, M. E. (2009). 'Contextual factors surrounding reputation damage with

potential implications for reputation repair'. Academy of Management Review, 34/1: 146-68.

Rhee, M. and Hadwick, R. (2011). 'Repairing damages to reputations: A relational and behavioral

perspective', in R. J. Burke, G. Martin, and C. L. Cooper (eds.), Corporate Reputation: Managing Threats and Opportunities. Surry, UK: Gower: forthcoming.

Sørensen, J. B. (2002). 'The strength of corporate culture and the reliability of firm performance'.

Administrative Science Quarterly, 47: 70-91. Schein, E. H. (1972). Professional Education: Some New Directions. New York: McGraw-Hill. Sitkin, S. (1992). 'Learning through failure: The strategy of small losses'. Research in

Organizational Behavior, 14: 231-66.

29

Sutton, R. I. and Callahan, A. L. (1987). 'The stigma of bankruptcy: Spoiled organizational

image and its management'. Academy of Management Journal, 30/3: 405-36. Taylor, A. and Greve, H. R. (2006). 'Superman or the fantastic four? Knowledge combination

and experience in innovative teams'. Academy of Management Journal, 49/4: 723-40. Tucker, A. L. and Edmondson, A. C. (2003). 'Why hospitals don't learn from failures:

Organizational and psychological dynamics that inhibit system change'. California Management Review, 45/2: 55-72.

Vaughan, D. (1997). 'The trickle-down effect: Policy decisions, risky work, and the Challenger

tragedy'. California Management Review, 39/2: 80-102. Weick, K., E. and Sutcliffe, K. M. (2006). 'Mindfulness and the quality of organizational

attention'. Organization Science, 17/4: 514-24. Winter, S. G. (2000). 'The satisficing principle in capability learning'. Strategic Management

Journal, 21: 981-96. Zollo, M. and Winter, S. G.. (2002). 'Deliberate learning and the evolution of dynamic

capabilities'. Organization Science, 13/3: 339-51.

30

Table 1. Summary of Existing Studies on Reputation Repair

Study

Empirical Contexts in Empirical Paper (E)/Theoretical Focus in Theory Paper (T) Reputation Repairing Activities

Sutton & Callahan (1987)

Bankruptcy of four Silicon Valley computer firms (E)

Impression management strategies (concealing, defining, denying responsibility, accepting responsibility, and withdrawing)

Marcus & Goodman (1991)

15 cases of organizational crises (accidents, scandals, and product safety incidents) (E)

Impression management strategies (defensive and accommodative signaling)

Fombrun (1996, Ch.15)

Financial scandal in Salomon Brothers (E)

Impression management (accommodative approach)

Reorganization (personnel, structural, and cultural changes)

Coombs (1998) Experimental cases of four crises types (accident, transgression, natural disaster, and product tampering) (E)

Impression management strategies (attack the accuser, denial, excuse, justification, ingratiation, corrective action, and full apology)

Dukerich & Carter (2000)

Mismatch between reputation and external image (T)

Impression management with inordinately or insufficiently allocated resources

Dowling (2001, Ch.12)

Different types of events depending on causal attributions (T)

Impression management strategies (hide-and-seek, fatalistic, offensive, and eye-for-an-eye)

Heugens, van Riel, & van den Bosch (2004)

Introduction of genetically modified foods by eight Dutch food firms (E)

Impression management capabilities (dialogue, advocacy, silence, and crisis communication)

Coombs (2007) Different types of crises types (victim, accidental, and preventable) (T)

Impression management strategies (denial, diminish, and rebuild)

Carroll (2009) Salmonella scare in Cadbury Schweppes (E)

Impression management (defensive approach)

Elsbach & Kramer (1996)

Reputational ranking of U.S. business schools (E)

Organizational members' perceptual change

Martins (2005) Reputational ranking of U.S. business schools (E) Reorganization

Rhee (2009) Reputation for product quality of automakers (E)

Learning effort to reduce subsequent organizational errors

Rhee & Valdez (2009)

Contextual factors affecting the difficulty of reputation repair (T)

Overcoming susceptibility to reputation-damaging events

Rhee & Hadwick (2011)

Reputation repair as trust and crisis management (T)

Recovering trust relationships with stakeholders

31

Figure 1. A Behavioral Model of Reputation Repair Process

32

Figure 2. Factors Affecting Reputation Repair Process and Performance